Meta stock drops under $600. Should you buy?

Meta’s Financial Performance and the Road Ahead

Meta Platforms (NASDAQ: META) has experienced a significant drop in its stock price, falling about 25% from an all-time high of nearly $800. As of this writing, the stock has slipped below $600. Despite this decline, the company’s underlying business continues to show strong performance.

In the fourth quarter, Meta reported impressive revenue growth, driven by its dominance in the digital advertising space. The company’s advertising revenue reached $58.1 billion for the quarter, a 24% increase compared to the same period last year. This success contributed to a robust operating margin of 41%, resulting in nearly $25 billion in operating income for the period.

However, this operating margin is notably lower than the 48% recorded in the previous year’s quarter. The decline is attributed to rising costs and expenses as Meta invests heavily in artificial intelligence (AI) infrastructure and talent. These increased expenses have also impacted the company’s earnings per share and free cash flow, which grew at a slower pace than revenue.

Strong Growth Amid Rising Costs

Despite the challenges posed by rising costs, Meta’s growth profile is strengthening. The company’s first-quarter guidance suggests a revenue growth of about 30%, indicating continued momentum. CEO Mark Zuckerberg highlighted the acceleration of AI initiatives during the company’s fourth-quarter earnings call, expressing optimism that 2026 will see further advancements on multiple fronts.

The cost of pursuing AI-driven growth is substantial. During the fourth quarter, Meta’s costs and expenses surged by 40% year over year, far outpacing its 24% revenue growth. Management expects this trend to continue in 2026, with expense growth anticipated to surge again. This investment cycle is expected to put pressure on operating income growth, potentially leading to lower profit margins.

A significant portion of this upcoming spending will go toward infrastructure costs, including third-party cloud spending and higher depreciation, as well as the addition of technical talent. To fund these investments, Meta has increased its long-term debt to approximately $58.8 billion, leveraging debt markets to support its infrastructure scale-up.

A Capital-Intensive Future

Meta’s financial position remains strong, with a total 2025 operating cash flow of $115.8 billion and $81.59 billion in cash, cash equivalents, and marketable securities at the end of the year. This financial flexibility allows the company to navigate the increased capital intensity of its operations.

While the recent stock decline might present a buying opportunity, investors should approach with caution. The valuation of Meta at a price-to-earnings ratio of about 25 appears reasonable given its projected revenue growth. However, the company’s shift toward a more capital-intensive model introduces new risks and uncertainties.

Investors interested in Meta might consider a small position, but the stock remains risky, especially with the potential for further declines if macroeconomic conditions worsen or if the return on infrastructure investments takes longer than anticipated.

The Broader Investment Landscape

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